A tax provision designed to boost local economies across the country has been getting a lot of attention in New Hampshire recently - not for its economic impact, but over allegations of political meddling.
Democrats are questioning whether Gov. Chris Sununu included Waterville Valley, the community where his family owns a ski resort and several large properties, in a so-called "Opportunity Zone," with an eye towards helping them financially.
NHPR's Morning Edition Host Rick Ganley spoke with Bob Sanders, a reporter for New Hampshire Business Review, who's been following these issues.
(Editor's note: This transcript has been edited lightly for clarity.)
First off, let's talk about what the Opportunity Zones are. What are they meant to accomplish?
Theoretically, they are supposed to attract investment into needy communities. Low income is actually the word that's used, though, [in] the actual law what is low income is so lax that it really isn't low income.
And I mean, there are many, many zip codes. It's something like a third of the zip codes in the country are eligible for this?
A half, really?
And one third in New Hampshire.
In 2018, New Hampshire announced 27 different Opportunity Zones across the state. What's your understanding of how they were selected and why?
The governor is appointed to select them; that's the law. And then he has a very short time to do it or the federal government will do it. And he gathered a bunch of advisers and then he made the final decision. The process is a little murky. And opponents of his are now putting in Right-to-Know requests to find out a little bit more about what happened.
Let's talk about Waterville Valley for a minute and the questions over its inclusion in these Opportunity Zones. The town is actually one of the wealthiest zip codes in New Hampshire. How has the Sununu administration explained why it was included?
Well, it's not zip codes. It's census tracts. So, it's not one of the wealthiest if you include some of the other [towns in that] census tract. And then, what's wealthy? There's two parameters to to be included, to be eligible to be picked. So the governor picks about a quarter of those that are eligible. There are 106 that were eligible. And so he picked 27. And so, for instance, Durham is one of the ones that has very, very low income. Well, it has a lot of students there. So it's low income. [You have] Waterville Valley, you have Lincoln and you have Thornton. Some of those may have some low income. In addition, you have anybody who's living there who works in the ski area. People don't make much in ski area.
There's a disparity. You've got vacation homes that might be wealthy, but you've also got residents who are not making a lot of money.
Right. But in terms of of the ones that were picked, it was one of the higher incomes. And in terms of the poverty rate, it wouldn't qualify at all. It's an either or it's income versus poverty rate.
Has the governor said why Waterville Valley was one of the ones that he put on that list?
He says it wasn't Waterville Valley. It was Lincoln and Thornton because they're on I-93 which is, like, at the heart of the North Country. And so he says it's not a conflict of interest at all.
You talked to James Sununu, the governor's brother, who's also director of the company that's overseeing the ski resort in the Waterville Valley. He told you that they have no plans to take advantage of this Opportunity Zone. Is that right?
He added the qualifier "at this time." He actually added that qualifier three times without solicitation. So he's definitely leaving that open. Later on, actually, he told another reporter over at the Union Leader, Kevin Landrigan, that it wouldn't qualify. It only will go for new investment. But I just looked into that, and that's not true at all. In fact, just Google "Opportunity Zones and renovations," and you have a hotel in Texas, for instance, that advertises itself as a qualified Opportunity Zone and it's all renovation.
So it would be theoretically possible that they could take advantage of this and get the tax benefit from it?
It's very, very loose in terms of what you invest in. And it's pretty much a free for all. I mean, the reason we looked into it is that there were articles of people investing in luxury hotels with pet spas. So it's basically if you invest in a business in these areas, then you qualify. And it's not just you get a triple tax break here.
One is if you invest your capital gains, you get a deferred capital gains. You get 15 percent off those capital gains that you got from somewhere else. And then you go pay no capital gains on where you're investing in. There's some parameters. You have to hang on to it 10 years. But there's very little transparency. This is all a tax break with the IRS. And as you know, those tax returns are very hard to come by.
Are there other projects in other zones in New Hampshire that you know of that are taking advantage of this?
There are a few. But again, the only way you can find out is by talking to the people investing and saying --
They have to disclose it?
They can disclose it publicly, but they don't have to do. And so nobody knows where this money is going and where these tax breaks are going. We found one, the Tru Hilton Hotel that is being built in the Manchester millyard, which caught our attention because our office is in the millyard. And it's certainly not a needy area lacking of investment, but because it has some poor pockets in it, it qualifies. Whereas some other areas in Manchester, which also qualify, weren't picked, presumably because they wouldn't track investment.
I mean, the way this thing works is that so many zones are qualified that if you're a big investor, why come to even the millyard? I mean, if you can invest in Manhattan, you can invest in Boston --
There's much in higher growth areas.
Well, yeah. Why would you do this? You want to get the best capital gains, because that's where you get your biggest tax break. So you want property to accelerate. You want to invest where everybody is already investing. So the idea that this would attract investment to needy areas, that may happen once or twice, but on the whole is attracting investments in the places where everybody is already investing, that's accelerating in value.